Delhi High Court
Raj Kumar Dua & Another vs Naresh Adhlakha & Others on 29 July, 2010
Author: Vipin Sanghi
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. 527/2009 & I.A. No.11711/2009
Date of Decision: 29th July, 2010
RAJ KUMAR DUA & ANOTHER ..... Petitioners
Through: Mr. S.S. Tomar, Advocates
versus
NARESH ADHLAKHA & OTHERS ..... Respondents
Through: Mr. Vikas Mahajan, Advocate for
respondent No.2
Mr. Ashok Dua, respondent No.3 in
person
CORAM:
HON'BLE MR. JUSTICE VIPIN SANGHI
1. Whether the Reporters of local papers may : No
be allowed to see the judgment?
2. To be referred to Reporter or not? : Yes
3. Whether the judgment should be reported : Yes
in the Digest?
% JUDGMENT (Oral)
VIPIN SANGHI, J
1. This petition has been preferred by the two petitioners, who
are brothers, under Sections 14 & 15 of the Arbitration and Conciliation
Act, 1996 (the Act) for termination of mandate of respondent No.1,
arbitrator. The respondent No.2 is the sister of the two petitioners and
the wife of respondent no.1, the arbitrator. Respondent No.3 is also a
brother of the petitioners and brother-in-law of respondent No.1.
O.M.P. 527/2009 & I.A. No.11711/2009 Page 1 of 20
2. A deed of family settlement was arrived at on 15.03.2005
between the two petitioners, respondent No.3 and respondent No.2.
By this deed of settlement the parties, namely, the three brothers and
the sister decided upon the manner of distribution of the properties left
by their parents. The said deed, which is a registered instrument, inter
alia, provided that "In the event of any dispute between them the
same shall be in discretion power of the Sole Arbitrator Shri Naresh
Adlakha S/o Shri R.S. Adlakha R/o H-I-133, Lajpat Nagar-I, New Delhi-
110024 appointed by the all the legal heirs of the deceased (late Smt.
Sudesh Dua) Shri Ashok Dua, Shri Raj Kumar, Shri Anil Dua and Smt.
Sividha Adlakh by virtue of undertaking, General Power of Attorney and
Special Power of Attorney. Whose decision shall be final and binding
upon all the legal heirs of the deceased (Late Smt. Sudesh Dua) Shri
Ashok Dua, Shri Raj Kumar Dua, Shri Anil Dua and Smt. Suvidha
Adlakha and their legal heirs and none of them would be
competent/entitled to change/alter/challenge if anywhere what so
ever."
3. With regard to the implementation of the settlement as
contained in the said deed, disputes arose between the parties. The
petitioner no.1 herein preferred a civil suit bearing No.1071/2006
before the Court of Senior Civil Judge, Delhi for declaration and
injunction against his other two brothers and sister. An application
under Section 8 of the Act read with Order 7 Rule 11 CPC was preferred
by Smt. Suvidha Adlakha, respondent No.2 and Sh. Ashok Dua,
O.M.P. 527/2009 & I.A. No.11711/2009 Page 2 of 20
respondent no.3 herein, invoking the aforesaid arbitration agreement.
Consequently, that application was allowed vide order dated
18.12.2008 and the disputes were referred to the arbitration of
respondent No.1 herein. The Court left the question of impartiality or
bias to be decided by the arbitrator himself. Therefore court did not
interfere at that stage to decide about such impartiality/bias of the
arbitrator. The court also declined to appoint a new arbitrator in place
of respondent no.1.
4. The petitioners preferred OMP No.70/2009, inter alia, under
Sections 14 & 15 of the Act. The petitioners sought the removal of
respondent No.1 herein from the position of arbitrator and also sought
appointment of a new arbitrator by this Court. That petition was
disposed of on 26.05.2009. In view of the provisions of Section 12 of
the Act the Court permitted the petitioners to move an application
before the arbitrator requiring him to disclose his interest in the
subject matter to the parties and to recluse himself. The arbitrator
was also directed to disclose his interest vis-à-vis the parties and pass
a speaking order on the application made by the petitioners.
5. The petitioners moved the application as aforesaid. The
arbitrator by his order dated 19.08.2009 disposed of the said
application and decided to continue with the arbitration proceedings.
He rejected the apprehensions expressed by the petitioners with
regard to his independence and impartiality by holding that they were
O.M.P. 527/2009 & I.A. No.11711/2009 Page 3 of 20
misplaced.
6. Consequently, the petitioners have preferred the present
petition also under Sections 14 & 15 of the Act to seek the termination
of the mandate of respondent No.1 and for appointment of an
independent arbitrator.
7. Upon issuance of notice to the respondents, a joint reply was
filed by respondent Nos.2 & 3 opposing the petition. However, today
respondent No.3 has appeared in person. He has disengaged his
counsel Mr. Vikas Mahajan and withdrawn the power of attorney given
to him. He further states that he also withdraws his reply and instead
he supports the petitioners in their prayer for termination of mandate
of respondent No.1 arbitrator. Consequently, it is only respondent
No.2, the wife of respondent No.1, who is opposing this application.
8. The submission of learned counsel for the petitioners is that
the reason given by the learned arbitrator for rejecting the challenge
to his mandate as an arbitrator on the ground of bias is that the parties
were aware of the relationship between them and the arbitrator.
Consequently, they could not have raised the said ground to allege
bias against him. So far so good.
9. However, he further submits that the arbitrator, in the order
passed by him, has also admitted that he has instituted a civil suit for
recovery against Sh. Anil Dua, petitioner No.2 herein for monies
O.M.P. 527/2009 & I.A. No.11711/2009 Page 4 of 20
allegedly advanced by him prior to his appointment as an arbitrator,
and that he has also lodged FIR No.588/2008 at police station Sarojini
Nagar against, inter alia, Sh. Anil Dua for his alleged forcible entry into
flat No.102, Sarojini Nagar, New Delhi. The petitioners submit that
these developments had taken place after the appointment of
respondent No.1 as an arbitrator and since he has acted against the
interest of petitioner No.2 by initiating litigation and lodging a first
information report, it cannot be said that the arbitrator would act
without any bias at least against one of the parties to the arbitration.
10. This petition is opposed by respondent No.2. Learned
counsel for the respondent No.2 submits that the challenge to the
appointment and continuation of an arbitrator on the ground of bias
can be raised under Section 12 by adopting the procedure under
Section 13. Under Section 12(3) an arbitrator may be challenged if -
(a) circumstances exist that give rise to justifiable doubts as to his
independence or impartiality. Under Section 12(4) a party may
challenge an arbitrator‟s appointed by him, or in whose appointment
he has participated, only for reasons of which he becomes aware after
the appointment has been made. Section 13 provides that a party who
challenges the authority of the arbitrator on the ground contained in
Section 12 unsuccessfully, can raise a grievance while preferring
objections to the arbitral award, that may be rendered, under Section
34. It is, therefore, argued that a ground of bias cannot be raised
under Section 14 and the same would not be covered by the
O.M.P. 527/2009 & I.A. No.11711/2009 Page 5 of 20
expressions "de jure" or "de facto" inability to perform his functions by
the arbitrator.
11. Mr. Mahajan, learned counsel for respondent no.2 has relied
upon the decision of a Division Bench of this Court in Bharat Heavy
Electricals Ltd. v. C.N. Garg & Ors. 88 (2000) DLT 242 (DB) to
submit that once the challenge to the authority of the arbitrator under
Section 12 by resort to Section 13 fails, the party has no other
alternative remedy, but to proceed with the arbitration and the
challenge can be re-agitated, if necessary, at the stage of Section 34
proceedings. He also relies on another decision reported as Neeru
Walia v. Inderbir Singh Uppal & Anr. 160 (2009) DLT 55 (decided
on 29.05.2009). In this decision, it was held by the learned Judge (S.N.
Dhingra, J) that the provisions of Sections 14 & 15 of the Act cannot be
invoked for termination of the mandate of an arbitrator on the ground
that he was acting with a bias. While rendering this decision, the
learned Single Judge had relied on an earlier decision of his in Delhi
State Industrial & Infrastructure Development Cop. Ltd. v.
Integrated Techno System Pvt. Ltd. & Anr. 2009 (111) DRJ 468
(decided on 25.05.2009).
12. Having heard learned counsels for the petitioners and
respondent No.2, I am of the view that this is a fit case for termination
of the mandate of the respondent No.1 arbitrator.
13. With due respect, I do not agree with the view taken by the
O.M.P. 527/2009 & I.A. No.11711/2009 Page 6 of 20
learned Single Judge in Neeru Walia (supra) and in Delhi State
Industrial & Infrastructure Development Cop. Ltd. (supra), and
do not consider myself to be bound by them, as they have been
rendered without taking into account the earlier decision of this Court
in Alcove Industries Ltd. v. Oriental Structural Engineers Ltd. &
Anr. 2008 (1) Arb. L.R. 393 (Delhi) decided on 28.12.2007 by me and
the decision of another learned Single Judge of this Court (Rajeev Sahai
Endlaw, J) in National Highways Authority of India v. K.K. Sarin &
Ors. 159 (2009) DLT 314 (decided on 09.04.2009).
14. It was held in Alcove Industries Ltd. (supra) that there is
no inconsistency between the remedies available to a party under
Sections 12 and 13 on the one hand and Section 14 on the other and
the invocation of one remedy by a party does not restrict that party
from invoking the other remedy as well. It was held that these
remedies constitute a single scheme, wherein the aggrieved party
would first be expected to challenge the arbitrator under Sections 12
and 13, and if that fails, and; the party is still aggrieved, and; can
make out a case of de jure or de facto inability of the Arbitrator to act,
to move the Court under Section 14. It was held that the power of
Court under Section 14 to decide the controversy as to whether or not
the mandate of the arbitrator stands terminated cannot be taken away
by a decision of the arbitrator under Section 13(2) of the Act, which in
no way, is binding on the Court. Pertinently, in Neeru Walia (supra)
the Court also placed reliance in Newton Engineering and
O.M.P. 527/2009 & I.A. No.11711/2009 Page 7 of 20
Chemicals Ltd. v. Indian Oil Corporation Ltd. & Ors. 136 (2007)
DLT 73, which was elaborately discussed in Alcove Industries Ltd.
(supra) and it was held that the said decision did not lead to an
inference that in appropriate cases the remedy under Section 14 of the
Act cannot be invoked by an aggrieved party, merely because it is
open to him to raise the challenge before the arbitrator under Section
13 read with Section 12, which he may or may not invoke. The decision
in Delhi State Industrial & Infrastructure Development Cop.
Ltd. (supra) rendered by the same learned Judge also does not take
into account the earlier decision in Alcove Industries Ltd. (supra).
15. In National Highways Authority of India (supra) the same
view hat been taken as that in Alcove Industries Ltd. (supra).
Paragraphs 28, 34 & 35 of this decision are relevant and are
reproduced hereinbelow:
"28. I have already in Sharma Enterprises v. National
Building Constructions Corporation Ltd.
MANU/DE/1238/2008 held that Section 5 of the 1940 Act as
interpreted in Panchu Gopal Bose (supra) finds place in the
form of Section 14 of the 1996 Act. There can be no other
interpretation of the power given to the court to terminate
the mandate of the arbitrator when the arbitrator de jure is
unable to perform this function. The de jure impossibility
can be nothing but impossibility in law. Bias vitiates the
entire judicial/arbitration process and renders the entire
proceedings nugatory. Reference in this regard may also
be made to State of West Bengal v. Shivananda Pathak
MANU/SC/0342/1998 : [1998]1SCR811 cited by the ASG,
though in a different context, holding that all judicial
functionaries have necessarily to decide a case with an
unbiased mind; an essential requirement of a judicial
adjudication is that judge is impartial and neutral and in a
position to apply his mind objectively - if he is predisposed
O.M.P. 527/2009 & I.A. No.11711/2009 Page 8 of 20
or suffers from prejudices or has a biased mind he
disqualifies himself from acting as a judge. This equally
applies to arbitrators, as statutorily provided in Sections 12
and 13. In my opinion, if the arbitrator is biased, he is de
jure unable to perform his functions within the meaning of
Section 14. Thus if the court without any detailed enquiry
is able to reach a conclusion of arbitrator for the reason of
bias is unable to perform his functions, the court is
empowered to, without requiring the parties to inspite of so
finding go through lengthy costly arbitration, hold that the
mandate of arbitrator stands terminated. However, the
said power under Section 14 has to be exercised sparingly
with great caution and on the same parameters as laid
down by Apex Court in SBP & Company v. Patel
Engineering Limited 2005 8 SCC 618 in relation to Section
11(6). Only when from the facts there is no doubt that a
clear case of bias is made out, would the court be entitled
to interfere. Else it would be best to leave it to be
adjudicated at the stage of Section 34.
34. I have also wondered as to whether Section 13(5) leads
to an inference that upon the challenge to the arbitrator
under Section 13(1) being unsuccessful, the only remedy is
under Section 34 of the Act inasmuch as Section 13(5)
does not make any reference to Section 14. However, if we
are to hold so then we would be rendering the de jure
inability of the arbitrator to perform his functions otiose. To
me, the scheme of the Act appears to be that the
challenge has to be first made before the arbitrator in
accordance with the Section 13 of the Act and upon such
challenge being unsuccessful the challenging party has a
remedy of either waiting for the award and if against him
to apply under Section 34 of the Act or to immediately
after the challenge being unsuccessful approach the court
under Section 14 of the Act. The court when so approached
under Section 14 of the Act will have to decide whether the
case can be decided in a summary fashion. If so, and if the
court finds that the case of de jure inability owing to bias is
established, the court will terminate the mandate. On the
contrary, if the court finds the challenge to be frivolous and
vexatious, the petition will be dismissed. But in cases
where the court is unable to decide the question
summarily, the court would still dismiss the petition
reserving the right of the petitioner to take the requisite
plea under Section 34 of the Act. This is for the reason of
the difference in language in Section 14 and in Section 34
O.M.P. 527/2009 & I.A. No.11711/2009 Page 9 of 20
of the Act. While Section 14 provides only for the court
deciding on the termination of the mandate of the
arbitrator, Section 34 permits the party alleging bias to
furnish proof in support thereof to the court. Section
34(2)(a) is identically worded as Section 48. The Apex
Court in relation to Section 48 has in Shin-Etsu Chemicals
Co. Ltd. v. Aksh Optifibre Ltd. MANU/SC/0488/2005 :
AIR2005SC3766 held that leading of evidence is
permissible. Per contra, Section 14 does not permit any
opportunity to the petitioner to furnish proof. Thus all
complicated questions requiring may be trial or
appreciation of evidence in support of a plea of bias are to
be left open to decision under Section 34 of the Act.
35. I therefore conclude that a party alleging bias is
required to first follow the procedure in Sections 12 and 13
and if unsuccessful has choice of either waiting till the
stage of Section 34 or if he feels that bias can be
summarily established or shown to the court, approach the
court immediately under Section 14, after the challenge
being unsuccessful, for the court to render a decision."
16. The decision of the Division Bench in Bharat Heavy
Electricals Ltd. (supra) relied upon by learned counsel for respondent
No.2, in my view, does not advance the submission made by him. A
perusal of the said judgment shows that it was rendered in writ
proceedings wherein the vires of Section 13(3) & (4) of the Act had
been challenged. The challenge was raised on the ground that there
was no provision in the Act for removal of the arbitrator by the Court
though such a provision was contained in Section 11 of the Act of
1940. It was also contended that no remedy was available to the
aggrieved party under the Act for challenging the award on the ground
of bias and prejudice on the part of the arbitrator. While dealing with
the first of the aforesaid two submissions the Division Bench in
O.M.P. 527/2009 & I.A. No.11711/2009 Page 10 of 20
paragraphs 8, 13, 14 & 15 held as follows:
"8. The legislature was more than cautious
while providing in explicit term that no judicial
Authority shall intervene except where so
provided (Section 5). Thus clear mandate is to
bar judicial interference except in the manner
provided in the Act. Conversely if there is no
provision to deal with a particular situation,
Courts cannot assume jurisdiction and
interfere. Comparing this legislation with the
earlier legislation on the subject-namely the
Arbitration Act, 1940, the message is loud and
clear. The legislature found mischief in various
provisions contained in the Arbitration Act,
1940 which would enable a party to approach
the Court time and again during the pendency
of arbitration proceedings resulting into delays
in the proceedings. Law makers wanted to do
away with such provisions. So that arbitration
proceedings are not unduly hampered. The
very purpose of arbitration, which is an
alternate Dispute Redressal Forum, is defeated
once the Courts interfere with these
proceedings. The experience in the working of
the old Arbitration Act showed that it was
resulting in more delays than in civil suits.
Therefore, not only such provisions were
omitted in the new Act, provision in the form of
Section 5 was inserted to convey the message.
The scheme of the new Act is clear enough, i.e.
during the arbitration proceedings Court‟s
interference is done way with. The new Act
deals with the situation even when there is
challenge to the constitution of the Arbitral
Tribunal. It is left to the Arbitrator to decide the
same in the first instance. If a challenge before
the Arbitrator is not successful, the Arbitral
Tribunal is permitted to continue the Arbitral
proceedings and make an Arbitral award. Such
a challenge to the constitution of the Arbitral
Tribunal before the Court is then deferred and
O.M.P. 527/2009 & I.A. No.11711/2009 Page 11 of 20
it could be only after the arbitral award is made
that the party challenging the Arbitrator may
make an application for setting aside an
arbitral award and it can take the ground
regarding the constitution of Arbitral Tribunal
while challenging such an award. Thus course
of action to be chartered in such contingency is
spelt out in the Act itself. Court interference on
basis of petitions challenging Arbitral Tribunal
during the pendency of the arbitration
proceedings would be clearly against the very
spirit with which the Arbitration and
Conciliation Act, 1996 has been enacted. The
mischief which existed in the earlier enactment
and is sought to be removed by the present
enactment cannot be allowed to be introduced
by entertaining writ petitions in the absence of
any provision in the new Act in this respect. A
statute is an edict of the legislature and the
conventional way of interpreting or construing
a statute is to seek the „intention‟ of its maker.
A statute is to be construed according "to the
intent of them that make it" and "the duty of
judicature is to act upon the true intention of
the legislature--the mens or sententia legis".
...................................
....................................
13. The challenge to the constitutional validity
of the statutory provisions was levelled mainly
on the grounds that the Act does not contain
any remedy for a party who makes allegations
of bias and prejudice against an Arbitrator and
an arbitral award passed by such an Arbitrator
cannot be challenged. In other words, accord-
ing to him, there is no remedy to an aggrieved
party in such a situation. His argument was
that although Sub-section (5) of Section 13
prescribed that party challenging the
Arbitration may make an application for setting
aside an arbitral award in accordance with
Section 34, reading of Section 34 would show
that no provision is made to challenge the
arbitral award on the ground of bias or
partiality of the Arbitral Tribunal. He further
submitted that arbitral award can be set aside
only on the grounds mentioned in Section 34
and in the absence of a provision enabling the
party to challenge arbitral award on the ground
of bias of an arbitral proceeding, such a ground
would not be entertained within the
parameters of Section 34 and, therefore, the
aggrieved party is in fact rendered without
remedy and this makes Sections 13(3) and
13(4) as unconstitutional. We are unable to
agree with this contention of the Counsel for
the petitioner. This way say so on two grounds:
First, Sub-section (5) of Section 13 provides
that an aggrieved party can challenge the
Arbitrator and seek the relief of setting aside of
such an arbitral award in accordance with
Section 34 of the Act. Clause (b) of Sub-section
(2) of Section 34 empowers the Court to set
aside an award where the Court finds that the
award is in conflict with the public policy of
India. The Explanation to the clause shows that
this clause has to be liberally interpreted.
Public policy will include an award being
challenged on account of fraud or corruption. In
the present case the petitioner has tried to
level allegations of bias and prejudice against
the Arbitrator. Bias and prejudice are matters
which are contrary to public policy and verge
on corruption. Though the term „public policy‟
is incapable of precise definition, it connotes
some matter which concerns public good and
public interest. The principles governing public
policy are capable of expansion or
modification. The Supreme Court observed in
Central Indian Water Transport Co. Ltd.
and Anr. v. Brojo Nath Ganguly, reported as
AIR 1986 SC1571, that if there is no head of
public policy which covers a case, then the
Court must in consonance with public
conscience and in keeping with public good
and public interest declare practices which
were considered normal at one time but have
become obnoxious and oppressive to public
conscience, to be opposed to public policy. It
observed: "Above all, in deciding any case it
may not be covered by authority our Courts
have before them the beacon light of the
Preamble to the Constitution. Lacking
precedent, the Court can always be guided by
that light and the principles underlying the
Fundamental Rights and the Directive
Principles enshrined in our Constitution". The
principle of public policy is this: „ex dolo malo
non oritur actio‟. Lord Brougham defines public
policy as the principle which declares that no
man can lawfully do that which has a tendency
to be injurious to the public welfare. Public
policy comprehends only protection and
promotion of public welfare. Principles of
natural justice that is, „jus naturale‟ are
founded on public policy. They are the very
foundation of any administrative system. From
time immemorial, the decisions of judicial or
quasi-judicial bodies including Administrative
Tribunals are tested on these principles. This
initial application of the doctrine of natural
justice to Courts and quasi-judicial bodies has
been extended even to Administrative
Authorities who have the function of
determining civil rights and obligation. Those
whose duty it is to decide must act judicially.
They must deal with the question referred to
them without bias and they must give to each
of the parties the opportunity of adequately
presenting their case. The decision must be in
consonance with this spirit and the Tribunal
should act with a sense of responsibility. It
cannot be imagined that legislature intended
not to make bias as one of the grounds of
challenge to the arbitral award. We are,
therefore, of the view that it will be difficult to
exclude a challenge on account of bias and
prejudice on the part of the Arbitrator from the
purview of Sub-clause (ii) of Clause (b) of Sub-
section (2) of Section 34 of the Act. If the
allegations of bias and prejudice are
established, no Court will countenance such
allegations. If a Court is satisfied that there is
merit in such allegations, the award will have
to be set aside. In our view, the relevant
provisions of the Act, referred to above, are
sufficient to enable an aggrieved party to
challenge an arbitral award on the basis of
allegations of bias and prejudice on the part of
an Arbitrator and it cannot be said that such a
party is without any remedy under the Act.
Thus we find no merit in the contention that
Section 13(3) and (4) are ultra vires the
Constitution of India on account of there being
no provision in the Act to challenge an award
on the ground of bias and prejudice on the part
of Arbitrator.
14. Sub-section (5) of Section 13 has to be read
along with Section 34 of the Act for this
purpose. Sub-section (5) of Section 13
specifically provides that party challenging the
Arbitrator may make an application for setting
aside "such" an arbitral award in accordance
with Section 34 of the Act. It clearly implies
that challenge is permitted even on the
grounds taken by the aggrieved party on which
the challenge to the Arbitral Tribunal was made
as, in the instant case, on the ground of bias
and partiality of the Arbitral Tribunal. Thus
even on principle of „Doctrine of Incorporation‟
this ground has to be read in Section 34.
Section 34 cannot be read in the manner
suggested by the petitioner inasmuch as then
it would amount to taking away the right of the
aggrieved party which has been conferred
upon him under Section 13(5) of the Act.
Provisions of Section 13(5) and Section 34 are
to be read harmoniously. A right conferred
upon an aggrieved party under Section 13(5) of
the Act cannot be taken away by a narrow and
pedantic interpretation of Section 34 of the Act.
15. A possible question in this connection may
arise about there being no provision for
removal of an Arbitrator during the arbitration
proceedings by the Court. Admittedly the Act
does not contain any provision where the Court
can remove an Arbitrator during the pendency
of arbitration proceedings. In this connection
we have to remind ourselves of the intention
behind the legislation, i.e. the Arbitration and
Conciliation Act, 1996. As already observed,
the Act is modelled after the UNCITRAL Model
Law. This Model Law has been adopted by
various countries. The need for such a Model
Law arose because of increased international
commercial activity. Such activity in modern
times is at Government or Semi-Government
level. In such circumstances it was only fair
and proper that all the participating countries
should have similar legal provisions when it
came to Arbitration. In fact Arbitration is
envisaged as a method for speedy alternate
redressal of disputes between the parties to
commercial transactions. If Court interference
was permitted during arbitration proceedings,
the very object of speedy redressal of disputes
would have been frustrated. That is why
keeping the peculiar conditions in India,
coupled with the need for speedy resolution of
disputes, the provision of Court interference
was avoided. Rather Section 5 was inserted
which provides that there will be no judicial
intervention. We have already noted that a
party having grievances against an Arbitrator
on account of bias and prejudice is not without
remedy. In has only to wait till the arbitral
award comes and it can challenge the award
on various grounds including bias and
prejudice on the par t of the Arbitrator. Before
the stage of challenge of award under Section
34 comes, Sub-sections (1), (2) and (3) of
Section 13 envisage a situation where the
Arbitrator may on his own recluse himself on
objection being taken qua his functioning as an
Arbitrator or where both the parties agree to
his removal as per procedure accepted by
them. If both fail, the Arbitrator is required to
decide on the challenge to his functioning as
an Arbitrator levelled by a party. The Arbitrator
is expected to be a fair person and if he finds
that there is substance in the allegations, an
Arbitrator is expected to dispassionately rule
on such an objection. Failing all this the last
resort for an aggrieved party is the challenge
under Section 13(5) read with Section 34. Thus
going on with the ethos of the new Act of
speedy progress of arbitration proceedings
without judicial interference coupled with the
fact that an aggrieved party is not without
remedy, it cannot be said that the absence of a
provision regarding removal of an Arbitrator
renders the relevant provisions of the statute
ultra vires the Constitution. We are of the
considered view that absence of a provision of
removal of an Arbitrator does not render the
relevant statutory provisions invalid or ultra
vires the Constitution of India."
17. A perusal of the aforesaid discussion shows that the Court did
not consider the interplay of Sections 12 & 13 with Sections 14 & 15 of
the Act. The issue as to whether a petition under Section 14 to seek
the termination of the mandate of an arbitrator on the ground of the
arbitrator becoming de jure or de facto unable of perform his function
is maintainable, was not raised before the Court and was not under
consideration of the Division Bench. I, therefore, reject the submission
of the respondent that the present petition is not maintainable at this
stage and that the only remedy available to the petitioner is to wait for
the arbitral award to be rendered and then, if they are still aggrieved,
to prefer objections under Section 34 of the Act by, inter alia, raising a
ground of bias against the respondent No.1.
18. In the present case, the challenge to the authority of the
arbitrator to proceed with the arbitration, premised on the fact that he
is the brother-in-law of petitioner Nos.1 & 2 and respondent No.3 and
the husband of respondent No.2, has rightly been rejected by the
arbitrator as this was a fact which was well known to all the parties
even at the time when respondent No.1 was named as the arbitrator
under the agreement. The said challenge was clearly barred under
Section 12(4) of the Act.
19. However, the matter does not rest there. The order passed
by the arbitrator discloses that he has, after the execution of the
settlement deed containing the arbitration agreement, personally
initiated civil and criminal proceedings against petitioner No.2.
Learned counsel for the petitioners states that, in fact, proceedings
had been initiated by the arbitrator against petitioner No.1 as well. In
any event, the admitted position is that at least against the petitioner
No.2, proceedings had been initiated by the arbitrator in a civil Court
as well as by lodging an FIR. This being the position, when the
arbitrator himself is embroiled in litigation against one of the parties to
the arbitration agreement, it is not possible to accept that the
arbitrator would be able to maintain his impartiality and objectivity
while adjudicating upon the rights of the parties. Justice is not only to
be done, but it should also be seen to be done. An arbitrator who is
himself entangled in litigation with one of the parties to arbitration,
cannot possibly be expected to act as a just and unbiased arbitrator.
His determination is bound to be clouded by the factum that one of the
parties appearing before him in the arbitral proceedings is his
adversary.
20. It would be too heavy a burden to put even on the shoulders
of a judge, who is sworn to do justice according to law between the
parties appearing before him, and whose mind is trained and
disciplined to do justice without allowing any other extraneous
considerations to cloud his view, in a case like the present, let alone a
lay person such as respondent no.1, to do justice between the litigating
parties. In my view, to allow the arbitral proceedings to continue
before respondent no.1 would be a completely futile and farcical
exercise, which would only lead to avoidable harassment and
unproductive expenditure of time and money, for all the parties. In my
view, therefore, the learned arbitrator has incurred a de jure inability
to perform his functions, inasmuch, as he cannot be expected to
comply with the requirements of Sections 18 of the Act, which provides
that the parties shall be treated with equality and that each party shall
be given the full opportunity to present his case.
21. For the aforesaid reasons, I allow this petition and terminate
the mandate of respondent No.1 as the arbitrator in the proceedings in
question.
22. Considering the nature of the dispute, I appoint Mr. Dinesh
Dayal, retired Additional District Judge, as the sole arbitrator to
adjudicate the disputes between the parties. He may fix his own fees
subject to a maximum of Rs.1 Lac to be shared equally between the
two petitioners, respondent No.2 and respondent No.3, apart from all
other out of pocket expenses. The learned arbitrator shall endeavour
to render his award within six months of the first date of hearing
before him. The respondent No.1 shall remit the arbitral record and
proceedings to the newly appointed arbitrator within a week. The
parties shall appear before the newly appointed arbitrator on
06.08.2010 at 04:00 p.m. A copy of this order be also communicated
to the learned arbitrator.
23. Petition stands disposed of.
VIPIN SANGHI, J.
JULY 29, 2010
rsk
